Correlation Between BNP Paribas and AXA SA

Can any of the company-specific risk be diversified away by investing in both BNP Paribas and AXA SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BNP Paribas and AXA SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BNP Paribas SA and AXA SA, you can compare the effects of market volatilities on BNP Paribas and AXA SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BNP Paribas with a short position of AXA SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNP Paribas and AXA SA.

Diversification Opportunities for BNP Paribas and AXA SA

0.97

Correlation Coefficient

BNP Paribas  AXA SA

Almost no diversification

The 3 months correlation between BNP and AXA is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA and BNP Paribas is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BNP Paribas SA are associated (or correlated) with AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of BNP Paribas i.e., BNP Paribas and AXA SA go up and down completely randomly.

Pair Corralation between BNP Paribas and AXA SA

Assuming the 90 days trading horizon BNP Paribas SA is expected to generate 1.63 times more return on investment than AXA SA. However, BNP Paribas is 1.63 times more volatile than AXA SA. It trades about 0.31 of its potential returns per unit of risk. AXA SA is currently generating about 0.27 per unit of risk. If you would invest  5,854  in BNP Paribas SA on December 27, 2024 and sell it today you would earn a total of  2,113  from holding BNP Paribas SA or generate 36.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

BNP Paribas SA  vs.  AXA SA

BNP Paribas SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNP Paribas sustained solid returns over the last few months and may actually be approaching a breakup point.

AXA SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AXA SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and AXA SA

The main advantage of trading using opposite BNP Paribas and AXA SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNP Paribas position performs unexpectedly, AXA SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AXA SA will offset losses from the drop in AXA SA's long position.

The idea behind BNP Paribas SA and AXA SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.